Floor Plan Financing Explained

A good rule of thumb is new car floor plans that allow for 90 days of inventory and used floor plan lines that allow for 60 days of inventory.

Floor plan financing explained.

However not all inventory finance companies offer retail and dealership wholesale financing options. Using cash or a bank line of credit to purchase inventory can work for some car dealers but many floor plan financing companies offer a variety of dealer specific benefits. Like any other financing facility the line must fit the financing needs of the borrower with some restraints to avoid excessive leveraging or over extension. How does floor plan financing work specifically to benefit auto dealers.

While some lenders are unable to properly serve independent dealers nextgear capital has proudly served the independent dealer market for over ten years our floor plan financing options allow dealers to finance nearly any. Floor plan financing is also done for large appliances mobile homes and boats among other items and these products are usually sold to consumers with a financing contract. For example a dealer might be able to borrow 10 million over the year to purchase 300 new cars. If your holding cost per day per unit is 44 63 and your turn time is 60 days you will spend 2677 of your profit holding on to a non selling car.

An auto rv manufactured home etc. Let s say you make a profit of 3 000 per car sold. When each piece of collateral is sold by the dealer the. Floor plan finance companies are uniquely attuned to the needs of auto dealers.

These loans are made against a specific piece of collateral i e. Floor plan financing changes this dynamic to a certain degree giving borrowers more control over their collateral. The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items.

Floor planning is a form of financing for large ticket items displayed on showroom floors. 3 amount of the line. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability. Floor plan lenders include local and regional banks large national banks and financing companies owned by the manufacturing companies like toyota financial or ford credit.

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Floor plan finance options are popular within the automotive industry. How does floor plan financing differ from other types of loans. With most commercial loans the collateral involved typically remains static.

The dealer then receives payment hopefully including a profit and remits the balance to the lender who in turn releases the title to the car to the new purchaser.